Big Box to Small Box: Growth factors for UK warehousing

A panel discussion at the 2026 UK Real Estate Investment & Infrastructure Forum (UKREiiF) explored how the UK industrial and logistics sector is evolving far beyond its traditional “big shed” roots.

Featuring investors, advisors and operational real estate specialists, the discussion highlighted a sector now driven by structural economic change, urbanisation, digitisation and shifting occupier requirements.

The panel brought together Swiss Life Asset Managers, Newmark and operational real estate specialists working across logistics, industrial and self-storage markets. Together, they painted a picture of a sector that has transformed from a relatively unfashionable “income” play into one of the UK’s most dynamic areas of real estate investment.

According to panel chair Jenny Buck, Chief Investment Officer at London CIV, industrial property was once viewed as the “dirty high-yield end of the sector”, but that perception has fundamentally changed. “It’s become one of the best-performing sectors,” she said, pointing to rental growth of around 5% and overall growth of 9% across the past five years.

Panel speakers

Industrial’s transformation into a growth sector

One of the strongest themes emerging from the discussion was the extent to which industrial and logistics assets are now viewed as long-term growth engines rather than simply stable income-producing property.

Simon Martindale, Fund Director at Swiss Life Asset Managers, said the sector has undergone a significant repositioning over the past two decades. “In the 2000s, industrial was all about income and there was limited rental growth,” he explained. “There has been a huge shift in rental growth. It’s now a growth engine for our strategy.”

Martindale noted that the occupier base itself has diversified dramatically. While traditional warehousing and distribution remain important, entirely new categories of tenant are now driving demand.

“We’ve seen growth in mid-box and urban logistics from online retailers, defence, advanced manufacturing and retail,” he said. “These are very profitable businesses.”

He also highlighted the rapid rise of social commerce and digitally-led retail businesses as a major factor shaping demand for medium-sized industrial units. Referring to one cosmetics business occupying a mid-size 40,000 sq ft facility, he said: “They sold £2 million of products in 14 hours through TikTok.”

That evolution is changing both the type of space required and the investment thesis behind the sector.

The rise of the “small box” economy

While “big box” logistics remains important, much of the panel focused on the growth potential emerging in smaller and medium-sized industrial assets, particularly in urban and edge-of-town locations.

James Lass, Head of UK Operational Real Estate at Swiss Life Asset Managers UK, argued that self-storage provides a particularly interesting lens through which to understand these changing dynamics.

“Self-storage sits at the intersection of industrial and residential,” he said. “The fastest-growing market is micro-businesses using self-storage differently.”

Lass explained that many small businesses are now using self-storage facilities as fulfilment hubs for online retail activity. “We see a significant amount of space occupied by small businesses trading through TikTok and similar platforms, giving them frictionless access to a global marketplace while needing somewhere to store inventory.”

He added that the self-storage sector itself is evolving rapidly beyond simple storage provision.

“Self-storage is diversifying into becoming business centres,” he said. “People are also taking office space and using them as micro-business fulfilment centres.”

Lass pointed to the scale of this shift by noting that 37% of floor space within Big Yellow facilities (the UK’s largest self-store provider) is now occupied by businesses rather than domestic users. “Residential is still the largest customer group,” he said, “but business is the fastest-growing.”

The discussion suggested that this trend reflects broader structural changes within the economy. Digital retailing, low-barrier entrepreneurship and changing consumer habits are all generating demand for flexible, smaller-scale industrial and logistics space close to urban populations.

Why overseas investors continue to favour UK industrial

Another major topic was the increasingly international nature of industrial investment in the UK market.

Nick Ogden, Partner at Newmark, said overseas capital is now playing a dominant role within the sector: “Last year, around 60% of industrial investment came from overseas capital, up from around 40% previously,” he said.

Ogden argued that industrial’s attractiveness lies in the combination of resilient cashflow, rental growth potential and diversification: “Investors like the cashflow. When they invest in this sector, they are buying future cashflow.”

He also noted that the UK’s distinct legal and currency environment makes it attractive for global investors seeking diversification away from mainland European markets.

“We’re in Europe but with a different currency and a different legal background, so the UK offers diversity for non-European investors,” he explained.

Digitisation continues to reshape demand

The panel identified digitisation as one of the defining structural drivers behind industrial growth.

Ogden pointed out that more than 60% of industrial tenants are linked to retail activity, meaning industrial performance remains closely connected to consumer spending and retail trends.

“Healthy retail equals healthy industrial,” he said. “People are likely to use online ordering more and more, so we will continue to see growth.”

He also highlighted the importance of demographic change: “Urbanisation continues,” Ogden said, noting that younger consumers are significantly more engaged with online spending habits.

Referring to data from online bank Revolut, he added: “Their customers’ average age is 36 and monthly online spending is 48%, compared to the UK average of 28%.”

His argument was clear: as digitally-native consumers age and their spending power increases, online retail demand will continue to rise,  and industrial property will benefit accordingly.

Digitisation is also reshaping how landlords operate their assets. Lass said data and AI tools are becoming increasingly important in helping operators understand customer behaviour and improve performance.

“We are a retailer selling small boxes to small businesses,” he said. “We need to understand tenant dynamics.”

He added that AI-driven pricing and customer analysis tools are already helping operators improve profitability and customer retention. “It comes down to improving your bottom line by adopting AI tools,” Lass said.

What occupiers now want from industrial space

The discussion also explored how occupier requirements have evolved significantly in recent years. Martindale said understanding tenant needs is now central to successful investment and asset management strategies: “Connection with the customer base is key."

Interestingly, he also suggested investors are now increasingly comfortable with shorter lease structures because they allow landlords to capture rental growth more frequently: “Three-to-five-year leases work for us,” he said. “Twenty-five-year leases are now rare.”

The technical specification of industrial buildings has also changed considerably: “Ten years ago, 10m eaves height was acceptable. Now it’s 14m-plus,” Martindale added.

Power availability has similarly become a defining factor: “Historically, occupiers might have wanted 100 to 300kW,” he explained. “Now they’re looking for 300 to 750kW.”

Energy efficiency is also now central to occupier decision-making, not simply because of regulation or ESG pressures, but because it directly affects operational costs: “The building which is less expensive to occupy is good for business,” Martindale said. He added that investor expectations are also accelerating the push toward decarbonisation.

“We have committed to Net Zero because our investors want that,” he said. “We need to work with our tenants to achieve that.”

New growth drivers: defence, near-shoring and resilience

The panel identified several emerging sectors likely to drive industrial demand over the coming years. Ogden highlighted defence as an increasingly important source of occupier demand.

“It’s not necessarily giant factories making tanks,” he said. “It can be smaller units supporting cybersecurity or producing specialist components such as fighter pilot helmets.”

He suggested that growing geopolitical uncertainty and rising government defence spending would create new industrial requirements across a range of locations and unit sizes.

Near-shoring was also identified as a growing trend: “We are seeing a shoring-up of supply chains against the backdrop of geopolitical upheaval,” Ogden said.

This trend could support demand for UK manufacturing, assembly and logistics space as businesses seek greater resilience and shorter supply chains.

The importance of last-mile and urban logistics

A recurring theme throughout the session was the ongoing shortage of urban and edge-of-town industrial space.

Lass argued that the next phase of industrial growth will be heavily driven by these constrained locations: “There is a shortage of edge-of-town supply -  the last-mile facility,” he said.

Martindale similarly pointed to urban logistics and mid-box opportunities as areas of particularly strong potential.

“There are opportunities for growth in this space, especially in urban areas where there is a lack of supply,” he said.

The panel suggested that these assets benefit from several converging trends simultaneously: population growth, online retail demand, same-day delivery expectations and constrained land availability.

Why asset management matters more than ever

Perhaps one of the clearest messages from the discussion was that industrial success increasingly depends on active management rather than passive ownership.

Martindale stressed the importance of detailed market research and understanding local demand drivers.

“Research is key,” he said. “You need to understand the demand drivers and the pockets of growth.”

He added that strong asset management capability is now critical: “Asset management is key, and having the skill to deliver business plans,” Martindale said.

The panel suggested that successful investors are no longer simply acquiring assets and waiting for returns. Instead, they are actively repositioning buildings, improving sustainability credentials, understanding occupier requirements and constantly seeking rental growth opportunities.

Planning and viability challenges remain

Despite the sector’s strong fundamentals, the discussion acknowledged several barriers to new development.

A question from the audience highlighted ongoing frustrations around planning delays and the difficulty of delivering multi-let industrial schemes.

Martindale admitted there remains a disconnect between government rhetoric and on-the-ground outcomes.: “The policy support is there,” he said, “but the outcomes are falling short.”

Lass added that rising construction costs and inflation continue to challenge project viability.

“The UK economic environment makes development difficult,” he said. “Rising build costs and inflation are pushing the cost and value of projects.”

The discussion suggested that this constrained development pipeline may itself support future rental growth by limiting new supply.

Opportunities in ageing industrial stock

The panel also explored opportunities to reposition older industrial assets. Martindale highlighted mid-box assets in urban locations as particularly attractive opportunities for value-add investors.

“We like urban assets that are 10 to 15 years old, close to residential areas, with a good business plan,” he said.

Ogden added that significant rental gaps now exist between older and newer stock.

“There is roughly a 40% rental discount for older buildings compared to new space,” he said.

That creates clear opportunities for refurbishment, repositioning and decarbonisation strategies that can close the gap between outdated assets and modern occupier expectations.

A sector still evolving

Overall, the discussion presented a picture of an industrial and logistics sector continuing to evolve rapidly in response to economic, technological and demographic change.

The days when industrial property was viewed primarily as a stable but unexciting income play appear long gone. Instead, investors are increasingly targeting growth opportunities linked to digital commerce, urban logistics, operational flexibility and changing occupier behaviour.

At the same time, the sector’s future will depend heavily on understanding increasingly diverse tenant requirements, delivering sustainable and power-rich buildings, and navigating planning and development constraints.

As the discussion repeatedly emphasised, success in today’s industrial market is no longer simply about owning “big boxes”. It is about understanding how the economy itself is changing, and how industrial space is adapting alongside it.